How To Qualify For FHA Loan in Saco California (Kern County)
Looking for an FHA Loan in Saco California?
FHA loans have been a flexible mortgage program that’s been around since the 1930’s and is insured by the Federal Housing Administration (FHA). Popular with first-time home-buyers, FHA home loans require more flexible minimum credit scores and down payments than many conventional loans.
How Does an FHA Loan Work?
Borrowers can qualify for an FHA loan with a down payment as little as 3.5% for a credit score of 580 or higher. The borrower’s credit score can be between 500 – 579 if a 10% down payment is made. It’s important to remember though, that the lower the credit score, the higher the interest borrowers will receive. Something also worth noting is that the FHA loan limits affect your FHA mortgage insurance – its just part of the FHA loan qualifications.
The FHA program was created in response to the increase of foreclosures and defaults that happened in 1930s; to provide mortgage lenders with adequate insurance; and to help stimulate the housing market by making mortgages much more accessible and attainable for home-buyers with not so great credit or a low down payment due to FHA mortgage limits in Saco, California. Essentially, the federal government insures loans for FHA-approved mortgage lenders in order to reduce their risk of loss if a borrower defaults on their home loan payments.
Because of that insurance, lenders can, and do, offer FHA home loans at really attractive mortgage loan interest rates and with less stringent and more flexible qualification requirements. The FHA is an agency within the U.S. Department of Housing and Urban Development.
(Or call 213-474-7389 to ask a local lender anything!)
Benefits of FHA Loans: Low Down Payments and Less Strict Credit Score Requirements
Typically an FHA loan in Saco is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. For FHA loans, down payment of 3.5 percent is required for maximum financing. Borrowers with credit scores as low as 500 can qualify for an FHA loan.
Borrowers who cannot afford a 20 percent down payment, have a lower credit score, or can’t get qualified for private mortgage insurance should look into whether an FHA loan is the popular option for their personal scenario.
Another advantage of an FHA mortgage loan is that it’s an assumable mortgage which means if you want to sell your property, the buyer can “assume” the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.
FHA Allows a 3.5% Down-Payment
For today’s home buyers, there are only a few mortgage options which allow for down-payments of five percent or less for residents of Kern County. The FHA is one of them.
With an FHA mortgage, you can make a down-payment as small as 3.5%. This benefits home buyers who don’t have a lot of money saved up for down-payment; and, home buyers who would rather save money for moving costs, emergency funds, or other needs.
FHA Allows 100% Gift Funds
The FHA is aggressive with respect to gifts for down-payment. Very few home loan programs will allow your entire down-payment for a home to come from a gift. The FHA will.
Via the FHA, your entire 3.5% down-payment can be a gift from parents or another relative, an employer, an approved charitable group, or a government home-buyer program. If you’re using a down-payment gift, though, you’ll need to follow the procedure.
The FHA Hybrid provides for an initial fixed interest rate for a period of three or five years, and then adjusts annually after the initial fixed time frame. The 3/1 and 5/1 FHA Hybrid products permit up to a 1% annual interest rate adjustment after the initial fixed interest rate period, and a 5% interest rate cap over the life of the loan. The new payment after an adjustment will be calculated on the current principal balance at the time of the adjustment. This insures that the payment adjustment will be minimal even on a worst case rate change.
About Saco California
Saco (Spanish for “Sack”) is an unincorporated community in Kern County, California. It is located on the Southern Pacific Railroad 7 miles (11 km) northwest of Bakersfield, at an elevation of 453 feet (138 m).
The Jewetta post office operated from 1893 to 1903, with a closure during 1896 to 1898. The name Jewetta honors Solomon and Philo D. Jewett, pioneers.
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Who Are FHA Loans For?
FHA loans are offered to low-income individuals who have credit scores as low as 500. Individuals with a credit score between 500-579 can obtain an FHA loan with a down payment of 10%; individuals with a credit score higher than 580 can get an FHA loan with as little as 3.5% down. The Federal Housing Administration does not lend the borrower the money to take on a home loan or to buy the property. Rather, the borrower pays a monthly or yearly mortgage insurance premium to the FHA to insure the loan which the lending institution issues to him or her. In case of default, the lender’s financial risk is minimized since the FHA would step in to cover the payments.
Having no credit history is not a problem with an FHA loan for Kern County. Instead of your credit report, the lender may look at other payment-history records, such as utility and rent payments.
Even people who have gone through bankruptcy and foreclosure may still qualify for an FHA loan. However, the lower the credit score and the lower the down payment, the higher the interest rate.
(Or call 213-474-7389 to ask a local lender anything!)
Kinds Of FHA Mortgage Loans
In addition to its popular FHA loan, the FHA also guarantees other loan programs offered by personal lending institutions. Here’s a look at each of them.
- FHA 203( k) loans – These FHA loans help homebuyers acquire a house– and remodel it– all with a single home mortgage. House owners can also use the program to refinance their current home loan and add the cost of renovating projects into the brand-new loan. FHA 203( k) loans can be found in 2 types:
- The limited 203( k) has a much easier application process, and the repair work or enhancements should amount to $35,000 or less.
- The standard 203( k) needs extra paperwork and applies to improvements costing more than $5,000, however the overall worth of the home should still fall within the FHA mortgage limitation for the area.
- Home Equity Conversion Mortgage, or HECM – A HECM is a popular type of reverse home loan and is also insured by the FHA. A HECM permits older property owners (aged 62 and up) with considerable equity or those who own their houses outright to withdraw a portion of their home’s equity. The quantity that will be available for withdrawal varies by customer and depends on the age of the youngest customer or eligible non-borrowing partner, present rates of interest and the lower of the house’s appraised worth or the HECM FHA mortgage limit or list prices.
- FHA Energy Efficient Mortgage (EEM) program – Energy efficient mortgages backed by the FHA permit property buyers to acquire houses that are already energy efficient, such as EnergyStar-certified structures. Or they can be utilized to buy and renovate older homes with energy-efficient, or “green,” updates and roll the expenses of the upgrades into the loan without a larger down payment.
- FHA Section 245( a) loan – Also referred to as the Graduated Payment Mortgage, this program is geared at debtors whose incomes will increase over time. You begin with smaller regular monthly payments that gradually increase. 5 specific plans are readily available: 3 plans that permit five years of increasing payments at 2.5 percent, 5 percent and 7.5 percent every year. Two other plans set payment boosts over 10 years at 2 percent and 3 percent annually.
(Or call 213-474-7389 to ask a local lender anything!)
FHA Loan Limits for 2023
For 2019, the floor limit for FHA loans in most of the country is $314,827, up from $294,515 in 2018. For high-cost areas, the ceiling is $726,525, up from $679,650 a year earlier. These limits are referred to as “ceilings” and “floorings” that FHA will guarantee. FHA updates limit quantities each year in action to altering home costs.
FHA is required by law to adjust its quantities based upon the loan limitations set by the Federal Housing Finance Agency, or FHFA, for conventional mortgages ensured or owned by Fannie Mae and Freddie Mac. Ceiling and floor limitations differ according to the expense of living in a certain area, and can be different from one county to the next. Areas with a higher expense of living will have greater limitations, and vice versa. Special exceptions are made for housing in Alaska, Hawaii, Guam and the Virgin Islands, where home construction is more expensive.
FHA Loan Relief
Loan servicers can provide some flexibility on FHA loan requirements to those who have suffered a major financial hardship or are struggling to make their payments.
That relief might be in the form of a short-term duration of forbearance, a loan modification that would lower the rate of interest, extend the repayment period, or delay part of the loan balance at no interest.
The FHA Hybrid Adjustable Rate
FHA administers a number of programs, based on Section 203(b), that have special features. One of these programs, Section 251, insures adjustable rate mortgages (ARMs) which, particularly during periods when interest rates are low, enable borrowers to obtain mortgage financing that is more affordable by virtue of its lower initial interest rate. This interest rate is adjusted annually, based on market indices approved by FHA, and thus may increase or decrease over the term of the loan. In 2006 FHA received approval to allow hybrid ARMs, in which the interest is fixed for the first 3 or 5 years, and is then adjusted annually according to market conditions and indices.
How do you Qualify for an FHA Loan in Saco CA?
The FHA makes it relatively simple to qualify for a mortgage loan. Again, the government guarantees the loan, so mortgage companies are more willing to approve loans. However, lenders can (and do) set standards that are stricter than FHA requirements. If you’re having trouble with one FHA approved lender near Saco CA, you might have better luck with another.
Note: you never know until you apply. Even if you think you won’t qualify after reading this page, talk with an FHA approved lender in Saco to find out for sure.
Income limits: there are none. You’ll need enough to show that you can repay the home loan but these loans are geared towards lower income applicants. If you’re lucky enough to have a high income, you aren’t disqualified like you might be with certain first-time home buyer programs.
FHA Closing Costs
While FHA defines which closing costs are allowable as charges to the borrower, the specific costs and amounts that are deemed reasonable and customary are determined by each local FHA office.
FHA Debt Ratios
In order to prevent home-buyers from getting into a home they cannot afford, FHA requirements have been set in place requiring borrowers and/or their spouse to qualify according to set debt to income ratios.
FHA Credit Issues
An FHA loan applicant’s past credit performance that attests good credit history and a solid track record of timely payments will likely be eligible for the mortgage.
How to Find FHA Lenders
Debtors get their mortgage from FHA-approved loan providers in Saco rather than the FHA itself, which only guarantees the loans. FHA-approved lending institutions can have various rates and expenses, even for the same loan.
FHA loans are offered through numerous sources– from the most significant banks and credit unions to community banks and independent home mortgage lending institutions. Expenses, services and underwriting standards differ among lending institutions or mortgage brokers, so it’s essential to look around.
Learn more about how to discover low FHA mortgage loan provider.
